The secret’s out on energy broker commissions – have you been affected?
Most people who have ever been involved with finding a business energy supplier will have done so through the use of a broker. This is typical in an industry with hundreds of suppliers, offering a wide range of different products. Unlike the consumer market, the commercial energy market has significantly less customer protection.
Energy brokers are intermediaries between the consumers and energy suppliers. Their role, as represented to consumers, is to review the market and present the best possible deal. However, in a typical case there is no contractual relationship between brokers and the commercial customer looking to obtain energy supply. The broker’s contractual relationship is in fact with the energy supplier. This means that there is no contractual duty of care owed by brokers to customers. As for remuneration, brokers receive a fee or commission from the energy supplier.
What is an energy broker commission claim?
The issue at hand is that the commission received by an energy broker as remuneration for their services is often a “secret commission”, in that the commission is not disclosed to the customer. The reality, therefore, is that a lot of commercial customers are not aware of the fees that energy broker companies are charging for their services. As a result of this failure to disclose commission fees, hidden charges, or other costs associated with the energy contract, customers are being deprived of the chance to see how the price they are paying is calculated.
The law
The leading principle in relation to a duty of disclosure in respect of commission can be found in the recent Court of Appeal Decision; Wood v Commercial First Business Ltd [2021] EWCA Civ 471, [2021] 3 WLR 395 (“Wood”). The key concept is that where a party to a contract makes an undisclosed payment to an agent or adviser that is engaged by the other contracting party, the question that should be asked is whether the payee was under a duty to provide information, advise or recommend on an impartial or disinterested basis. If so, the payment of a sum which the law regards as a bribe or “secret commission” will expose both the payee and the payer to the applicable civil remedies, and no further enquiry is required as to the legal nature of the relationship between the claimant and the payee (or the payer).
Some case law has gone further, and the Courts have held that a broker may be subject to a duty to disclose commission even if it does not provide specific advice to the customer. Brokers can be regarded as owing their clients a form of ‘fiduciary’ duty where they have represented to their clients that the terms offered by a supplier are competitive, such that customers put their trust and confidence in brokers. Potential liability does not end there. The case law is clear that it is equally the responsibility of customers’ suppliers to disclose the details of any commissions being paid to intermediaries which further increases the applicability of the law in this area.
What might I be entitled to recover?
Where “secret commission” has been paid, there may be numerous remedies available to an affected customer. We can help you recover the money that you have paid in undisclosed commissions, plus interest on those sums, and will consider whether any further damages can be claimed if additional losses have been suffered.
How can Ellis Jones help you?
If you are a business customer who has engaged with an energy broker to find a supplier, and consider that you were never informed of the existence or amount of commission fees which were paid to the broker, it may mean that you are potentially able to make a claim.
Our Banking and Finance Litigation team have successfully acted upon several high-profile mis-selling scandals in recent years, recovering millions of pounds for commercial and individual clients alike. We will always consider your individual circumstances to provide tailored advice at an affordable cost. For more specialist advice, guidance and help, please get in touch with Tim McMahon and Henrietta Frew on Banking@ellisjones.co.uk or give us a call on 01202 525333 for a no obligation consultation.
About the authors
Henrietta is a Senior Associate Solicitor within our Banking & Finance Litigation department based in the Bournemouth office. Henrietta specialises in various forms of commercial litigation, including claims involving financial product mis-selling, negligent advice by banks and other financial advisors and Commercial Disputes.
Tim is a Senior Associate Solicitor in the Banking & Finance Litigation department and is based in our London office. Tim has expertise in a range of Banking & Finance Litigation matters including, contractual disputes, debt recovery, consequential loss claims, commercial banking issues and much more.
How can we help?
When you submit this form an email will be sent to the relevant department who will contact you within 48 hours. If you require urgent advice please call 01202 525333.
